Rexam warns of falling demand in Russia

Rexam, the world's largest manufacturer of drinks cans, warned of
weaker-than-expected first-quarter sales as hard-pressed consumers cut back
on fizzy drinks.

By Rupert Neate

7:34PM BST 07 May 2009

The FTSE 100 company, which supplies Coca-Cola, Pepsi and SABMiller, warned that demand in Europe, particularly Russia, has been weaker than expected as its customers use up old stock. However, it said the drop was offset by increased demand in Latin America.

"In terms of cans both our customers and consumers are de-stocking," said Leslie Van de Walle, chief executive. "But all this talk of a good hot summer will help drive demand for can sales."

In a management statement, the company said first-quarter profits to the end of March were largely in line with the same period last year, but would have declined if it had not been boosted by the weak pound.

Mr Van de Walle said the company will restructure its plastic packaging division, which has suffered from a 10pc decline in sales. He said the company is aiming to achieve annual cost savings of £30m. There will be redundancies among the company's 24,000 global staff, but cuts in the UK will be minimal as only about 5pc of its staff work in Britain.

The company has already shut can plants in Georgia and Oklahoma and a production line in Texas. "Our longer-term strategy remains unchanged. We will continue to focus on the core drivers which have made Rexam successful," Mr de Walle said.

Rexam said its net debt at the end of the first quarter was better than it expected at £2.7bn and refinancing of its £775m credit facility, which expires in November 2010, is expected to be completed in the first half of the year.

Analysts expect Rexam to post 2009 full-year profits of about £342m, up from £328m in 2008,

The shares, which have risen by 13pc over the last month, closed down 21½, or 7pc, at 305¼p.